Despite rigorous regulation of cryptocurrencies in almost all regions of the world, the Blockchain industry grows in popularity and continues to evolve. After creating a huge multimedia boom, the Blockchain technology aroused a genuine interest among miners, start-ups, and investors. The reason for this is that Blockchain is the basis for the majority of cryptocurrency projects and was used to create the ICO (Initial Coin Offering) crowdfunding technology, which is a new and rather attractive way of investing and raising financing for projects. Unlike IPOs (Initial Public Offerings) or simply initial public sale of shares on the exchange, ICOs have a number of advantages, which allowed taking a major step forward in the field of investments. Within the context of IPOs, investors and entrepreneurs have to operate according to a set of rules whose conditions are not always beneficial for them. Issues occurring during IPOs mostly include time and financial costs: for small and medium-sized businesses, such fundraising method can turn out to be quite costly. However, ICOs also have some disadvantages, which bear certain risks for investors. For example, when participating in an ICO, investors have to rely on themselves to identify the sustainability of a project and draw conclusions regarding its validity. Also important is the fact that, in many countries, the IPO process is in a certain “legal vacuum” because the procedure is not regulated by any legislation, which makes it not very reliable.

Modern Solution

The Bitbon system functioning on the basis of a modified Ethereum blockchain stands out among the existing blockchain-based projects proposing to avoid main problems of investing and attracting financing. It has a number of features that can help with the regulation of crypto projects. The first thing in the Bitbon system which should be noted is contributing — an alternative method of investing and attracting financing by means of the smart contract technology. Contributing involves the use of a public contract for each project between certain users of this system (contractat, Bitup-agency and contributor) and completion of the next stages of this process, where:

• Public contract of a business project means a digital document that stipulates obligations of the parties to the contract and the terms and conditions of their interaction. These terms and conditions are digitized by means of smart contracts.
• Contractat means a legal entity or an individual, an entrepreneur who has a business plan, which requires financing.
• Bitup-agency means a Bitbon system participant, which acts as an auditor, has a legal right to make a decision on the admission of projects to the IBO and monitors the fulfillment of the terms and conditions of public contracts of each project at all stages of their implementation.
• IBO (Initial Business Offering) means a fundraising process, which is different from an ICO because it is carried out within the Bitbon system where all participants must be registered and verified, thus, any activity in the Bitbon system is conducted in accordance with the law.
• Contributor means a Bitbon system user financing projects attractive from the investor’s point of view in order to receive income.

Contributing Process

After the Bitup-agency admits the contract’s project to the IBO, contributors determine their shares in Projectbons (contract’s obligations expressed in a legal form) of this project in exchange for Bitbons. The Bitup-agency also monitors the fulfillment by the contract of the terms and conditions of the public contract of his/her business project and the implementation of this project in stages.

Bitbon Capitalization

There is a very important element in the system — the Bitbon Capitalization Fund, which automatically participates in the project financing and also acts as a contributor. The Bitbon Capitalization Fund provides all system participants with a mechanism that allows managing the system and belongs to all its users according to the number of Bitbons in their personal accounts. It means that each Bitbon system user has an opportunity to act in the collective interest in order to increase the Bitbon capitalization volume and, therefore, the total profit.

Regulation and Security

The issue of regulating crowdfunding platforms and ICOs has always been an important one. The tough response of regulating authorities to such platforms increases the investors’ risks and poses a threat to their investments. The distinguishing feature of the Bitbon System is that its functioning mechanism can exclude these and other existing problems related to investing and attracting financing for projects in accordance with the law. This achievement became possible due to a complex of solutions:

• complete transparency and decentralization due to the application of the Blockchain technology;
• registration and verification of each user;
• Bitup-agencies, which protect the participants’ interests;
• overall system management;
• the openness of actions to state authorities;
• confidentiality of personal data;
• credibility rating for each participant.

Data entry into the Blockchain becomes an irreversible process because the system foresees complete recording of the transaction history. In addition, the user’s access to his/her assets is protected by multi-factor authentication, which makes unauthorized actions almost impossible.

In conclusion, we would like to point out that such economic platform as the Bitbon system provides additional opportunities for modernizing the business model and transforming the economic system as a whole.